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Unfiled Tax Returns

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Canada has a self-reporting tax system. This means that it is each taxable entity that is required to report their income to the government by filing the appropriate tax return.  These returns include a T1 General for individual taxpayers, a T2 Return for corporate taxpayers, and a T3 return for trusts.  There are many other types of returns that apply to particular circumstances. Talk to your tax expert to see what your return filing obligations are.  

For individuals, the tax year is the calendar year (January 1 to December 31).  Individuals have to file a tax return (T1 Return), for the preceding tax year, either on or before April 30th, if they are employees, or on or before June 15th if you or your spouse earned business income.  If the individual taxpayer doesn’t have any Part I tax payable for the preceding year. Most people interpret this exemption as no balance being due (for example, if your employer has withheld enough tax from your paycheques and you don’t owe any more or are entitled to a refund).  However, the requirement is that you have file a return IF Part I tax is payable (whether paid or not).  Therefore, individuals earning income above the basic exemption threshold have to file a tax return annually.  There are special rules for deceased individuals in their year of death, as well as for their surviving spouses.  These special rules can be complex and it would be best to get the help of a tax expert so you reduce the amount of tax payable.

Trusts are also required to file tax returns for each of their tax years (also the Calendar Year). Trustees are required to file a T3 return within 90 days from the end of the tax year.  Corporations can have an off-calendar fiscal year, which also becomes their tax year.  A corporation that is required to file a tax return has to file its T2 return within six months of the end of its fiscal year.  It is important to remember that a return due date may be different from when the balance of taxes is due so as to avoid interest being charged on the balance outstanding.

Unfiled returns or incompletely files returns are a common problem for all types of taxpayers. If you do not file a return as required, the Canada Revenue Agency (CRA) can make a demand that you file your returns.  Alternatively, the CRA can assess you arbitrarily – they will use some method to take a guess at your income, leaving you with the almost impossible task of having to prove them wrong.  Unlike in most cases, when it comes to taxes, it is the taxpayer’s obligation to prove the CRA wrong, not for the CRA to prove that they are right.  To avoid the burden that comes with unfiled returns and the CRAs often draconian actions in relation to them, take unfiled returns very seriously.  It can be overwhelming dealing with returns for a number of years, but that is what a tax expert is here for – to lend you a hand and take on some of the burden of getting yourself current with your tax filing obligations.  

If you fail to file your return on time, you will be subject to late filing penalties.  The penalty is 5% of the balance owing PLUS 1% of the balance owning for each full calendar month your return is late (to a maximum of 12 months). If you’ve previously been charged late filing penalties in one of the past three tax years, the penalty doubles to 10% of the balance owing PLUS 2% of the balance owing for each full calendar month the return is late (up to a maximum of 20 months).  In addition to the penalties, if you have a balance owing, you will also have to pay compound interest on the balance outstanding for as long as the balance has not been paid in full.  Interest and penalties can quickly add up to exceed the amount of tax owing, sometimes resulting in people losing their possessions or having to file for bankruptcy.  You can see how important it is to get help to quickly become current in your filings if you are delinquent.  

There are many sources of information that the CRA has access to, allowing them to find people who are required to but have failed to file tax returns.  If you have unfiled returns, or if you have filed returns but either not reported all income you were required to report or have misreported amounts, you may be eligible for the CRA’s Voluntary Disclosure Program (VDP).  The VPD is a special program that provides taxpayers with an opportunity to come clean or become current with the incentive that, if you meet the criteria, you don’t need to pay penalties, get to cancel some of the interest, and won’t face criminal prosecution.  The monetary savings can be huge.  Time is of the essence when it comes to applying to the VDP because one of the criteria is that the disclosure is “Voluntary”. This means that you cannot have been approached by the CRA about the return or part of the return you need correct.  There are other criteria that are more technical and complex, making a tax expert an invaluable resource.  

Not only can you save significant amounts of money and avoid criminal prosecution by using the VPD, but becoming current or staying current with your tax filings is an important part of avoiding a tax audit by the CRA.  Whether you are under audit, or you are trying to become current to avoid or prevent an audit, you should get the help of a Toronto Tax Accountant.  The risks and cost of not getting your filings right or not making sure you meet the VDP requirements can be large and are often far outweighed by the cost of having an expert navigate the tax rules for you. 

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Testimonial

“Sam handled a complex and urgent tax situation with professionalism, attention to detail, and speed. He quickly sorted out the situation with the CRA and made significant improvement to my overall tax situation. I recommend Sam and his team to anyone who needs fast, reliable tax help that you can trust. ”

Heather Krause
pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

Sam Faris helped me with a complex cross border tax matter. This issue involved 12 years of tax returns and it was as a result from mistakes that my previous accountant did. He was able to perfectly address the issue with the CRA and to fix the returns under the voluntary disclosure program. End results; CRA accepted Sam’s work with not a single question and the returns were reassessed to my satisfaction without penalties and interest. Many thanks to Sam brilliant work.
Response from the owner:Dear Sir It was a pleasure working on your file and get you the results that you aimed to have and to your satisfaction. We have been dealing with similar cases for many years and we were confident that the results are favorable. Please feel free to contact us in the future if you do require further help.
I found Sam’s firm online and I read the excellent Google reviews about him and his team. I decided to hire him to help me navigate an issue with the CRA. Sam delivered as expected and as promised. Results were to my satisfaction and I am very happy with how the process was handled. Highly professional and extremely knowledgeable.
Response from the owner:Dear Tanya Thank you for the 5 stars Google review and your kind words. We strive to provide the best customer service and make our clients relax and calm during the process. The cases we are taking are very sensitive so providing quality work to the CRA is extremely important so just to avoid any escalation and to make sure that our package is accepted from the first round. We will remain at your disposal anytime you require our services. Sam Faris
You will notice Sam is very quick with his responses. He knows his stuff and gives solid advice. Highly efficient, would recommend.
Response from the owner:Dear Jay Thank you for the 5 stars positive review. Working with you was pleasant too. Many thanks for your business and please do feel free to contact me if you have any questions. Sam Faris
after the initial assessment I had with Sam, he proposed a strategy to dispute CRA decision. He knew up front how to approach my case as he seemed that he dealt with similar cases many times. I hired him the end results were as promised and no surprises. Sam is very trust worthy and has a high business standards. May thanks Sam.
Response from the owner:Many thanks for the positive review.
I recently turned to Faris CPA for help with my tax filing, and I must say, I'm over the moon with the results! The whole process was a breeze, saving me time and stress. What really stood out was the friendly professionalism, impressive expertise, and crystal-clear communication from Sam and his team. They made what could've been a daunting task feel like a walk in the park! If you're looking for a warm, approachable tax expert who genuinely cares about his clients, I wholeheartedly recommend Sam and the folks at Faris CPA - they're great tax consultants!
Response from the owner:Many thanks.
Working with Sam and his team was an extremely valuable experience. One of the best Tax consultants in Toronto I've ever come across.

He has a ton of experience resolving problems with the CRA and was truly a big asset to me when I had issues I needed help with.

Would highly recommend Sam and Faris CPA, thanks again for all the great work!
Response from the owner:Thank you Paul for your positive feedback and we are glad we met your expectations.
I had an amazing experience working with Faris CPA for my CRA needs. They really know the CRA processes and made everything so easy. They were super professional, always ready to answer my questions, and made sure everything was done right. I couldn't have asked for better help. Highly recommend their services for anyone dealing with the CRA! -Sara
Response from the owner:Thank you Sara for the 5 stars review.
Faris CPA absolutely fantastic tax consultant firm. Sam and his team help me with an extremely difficult tax audit by CRA. They have done an amazing job. You guys are amazing and well deserve five star.
Response from the owner:Dear Eliyas Thank you for the positive Google review and the kind words. We heave dealt with many CRA audit cases. We have delivered the best services to our clients as we are confident with our work and its quality. Please feel free to reach out us if you require our services in the future. Sam Faris
Sam Faris is number one tax advisor and consultant. I contacted a few professionals but he was the only one who was able to help me with my dispute with the CRA. Many thanks to him.
Response from the owner:Said Thank you for the kind words and the 5 stars Google review. CRA issues may get very complicated. I am glad that everything worked out perfectly with you. Feel free to reach out to us any time you require our services. Sam Faris